Mayville Engineering Company Announces Fourth Quarter and Full-Year 2023 Results
Mayville Engineering Company (MEC) reported strong financial results for the fourth quarter and full-year 2023, showcasing growth in net sales, net income, and adjusted EBITDA. The company also provided optimistic financial guidance for 2024, expecting continued growth and profitability. Management highlighted strategic initiatives to drive operational and commercial excellence, expansion into high-growth markets, and human resource optimization.
Positive
MEC reported a 15.6% increase in net sales for the fourth quarter of 2023 compared to the prior year, driven by organic growth and the acquisition of Mid-States Aluminum (MSA). Net income for the quarter was $2.2 million, with adjusted EBITDA of $17.7 million.
Full-year 2023 results showed a 9.1% increase in net sales, reaching $588.4 million. Net income for the year was $7.8 million, with adjusted EBITDA of $66.1 million. Free cash flow increased to $23.8 million.
MEC provided financial guidance for full-year 2024, expecting net sales between $620 million and $640 million, adjusted EBITDA between $72 million and $76 million, and free cash flow between $35 million and $45 million.
Management emphasized the company's progress in its business transformation journey, focusing on operational discipline, commercial expansion, and capital allocation. The recent acquisition of MSA positions MEC to capitalize on demand for lightweight materials in energy transition markets.
MEC's strategic initiatives include driving a high-performance culture, operational excellence, commercial expansion, and human resource optimization. The company aims to achieve total net sales of $750 to $850 million, adjusted EBITDA margin expansion to 14% to 16%, and free cash flow of $65 to $75 million by 2026 through its MEC Business Excellence (MBX) framework.
The company's balance sheet update as of December 31, 2023, showed net debt of $149.5 million and total cash availability of $250.01 million. MEC utilized free cash flow to repay debt incurred from the MSA acquisition.
Financial guidance for 2024 considers potential macroeconomic factors affecting end market demand, with expectations of offsetting these challenges through new project work and contributions from the MSA acquisition.
MEC's outlook for 2024 includes mid-to-high single-digit organic net sales growth, expansion in adjusted EBITDA margins, and significant growth in free cash flow generation, aligning with the company's long-term financial targets.
The reported net sales growth of 15.6% y/y and organic growth of 6.1% for Mayville Engineering Company (MEC) indicate robust performance, particularly in a manufacturing sector that often mirrors broader economic trends. The positive net income and substantial increase in Free Cash Flow (FCF) by $20.6 million y/y underscore the company's ability to generate cash post-capital expenditures, which is crucial for debt repayment and potential shareholder returns. The net debt to Adjusted EBITDA ratio of 2.1x, while improved, still suggests a moderate debt burden that management aims to reduce to a target of 1.5x to 2.0x by the end of 2024.
Adjusted EBITDA margins, although impacted negatively by the Hazel Park facility ramp-up, remained relatively stable. This is indicative of the company's operational resilience and ability to manage costs effectively despite external pressures. The acquisition of Mid-States Aluminum (MSA) and the associated revenue and cost synergies expected to be realized by 2024 could enhance MEC's competitive position in lightweight materials, a sector with growing demand due to energy transition movements. However, investors should monitor the integration process closely, as acquisition synergies are often challenging to achieve.
MEC's forward-looking statements for 2024, forecasting mid-to-high single digit organic net sales growth and Adjusted EBITDA margin expansion, reflect management's confidence in the company's strategic initiatives and market position. Yet, the anticipated softening in macroeconomic conditions could pose risks to these projections, necessitating a cautious outlook on the company's ability to achieve these targets.
MEC's strategic focus on high-value market adjacencies and increased automation suggests a deliberate shift towards sectors with higher growth potential and margin profiles. The emphasis on lightweight materials, particularly in the context of energy transition technologies, positions MEC favorably within a niche but expanding market segment. Given the growing environmental concerns and the shift towards electrification in the automotive industry, MEC's capabilities in lightweight material fabrication could see increased demand, contributing positively to future revenue streams.
The company's MBX initiative, aimed at driving operational and commercial excellence, is a critical factor in improving margins and operational efficiency. The expected Adjusted EBITDA margin expansion to between 14% to 16% by year-end 2026, if achieved, would represent a significant improvement and could lead to increased investor confidence. However, the success of such initiatives often depends on consistent execution and market conditions.
MEC's end-market diversification, including growth in the powersports and military sectors, mitigates risks associated with demand fluctuations in any single market. The strong pipeline of lightweight materials fabrication bidding activity and the expected synergies from the MSA acquisition further support the potential for market share expansion. Nonetheless, the company's performance in agriculture markets, which experienced softening demand, highlights the need for close monitoring of sector-specific trends that may impact future sales.
One area of concern highlighted in the report is the increase in legal costs associated with litigation against a former fitness customer. While the specifics of the litigation are not detailed, legal disputes can lead to unforeseen expenses and may distract from core business operations. It is important for stakeholders to understand the nature of these legal challenges and potential implications for MEC's financials and reputation.
Furthermore, the report mentions the impact of United Auto Workers (UAW) labor strikes on net sales and Adjusted EBITDA. Labor relations and the ability to effectively navigate union negotiations are critical for maintaining production stability and avoiding disruptions. As MEC continues to grow and potentially face more labor-related challenges, the company's approach to labor relations will be an important aspect for stakeholders to consider.
03/05/2024 - 04:15 PM
MILWAUKEE --(BUSINESS WIRE)--
Mayville Engineering Company (NYSE: MEC) (the “Company” or “MEC”), a leading value-added provider of design, prototyping and manufacturing solutions serving diverse end markets, today announced results for the three and twelve-months ended December 31, 2023.
FOURTH QUARTER 2023 RESULTS
(All comparisons versus the prior-year period)
Net sales of $148.6 million 15.6% y/y, including organic growth of 6.1% y/y
Net income of $2.2 million $0.11 $0.21
Adjusted EBITDA of $17.7 million $1.3 million
Adjusted EBITDA margin of 11.9% of net sales, including an 85-basis point negative impact from the ramp-up of production at the Hazel Park facility
Estimated $5.0 million $1.6 million
Record quarterly Free Cash Flow of $19.9 million $20.6 million
Ratio of net debt to trailing twelve-month Adjusted EBITDA of 2.1x as of Dec 31, 2023
FULL-YEAR 2023 RESULTS
(All comparisons versus the prior-year period)
Net sales of $588.4 million 9.1% y/y, including organic growth of 4.3% y/y
Net income of $7.8 million $0.38 $0.79
Adjusted EBITDA of $66.1 million $6.2 million
Adjusted EBITDA margin of 11.2% of net sales, including a 105 basis point negative impact from the ramp-up of production at the Hazel Park facility
Free Cash Flow of $23.8 million $29.9 million
FULL-YEAR 2024 FINANCIAL GUIDANCE
Net sales of between $620 million $640 million
Adjusted EBITDA of between $72 million $76 million
Free Cash Flow of between $35 million $45 million
MANAGEMENT COMMENTARY
“In 2023, we demonstrated significant progress on our multi-year business transformation journey, while leveraging our position as the market leading U.S. based vertically integrated provider of best-in-class design, engineering, and fabrications solutions,” stated Jag Reddy, President and Chief Executive Officer. “Last year, we sharpened our commercial focus, expanding within higher-value market adjacencies, while improving our operational discipline through increased automation and process efficiencies. We introduced a balanced capital allocation strategy, investing in innovation and inorganic growth, while returning capital to shareholders through opportunistic open market share repurchases.”
“Following the recent acquisition of Mid-States Aluminum (“MSA”), MEC is uniquely positioned to capitalize on rising multi-sector demand for lightweight materials fabrication capabilities,” continued Reddy. “MSA positions us to grow our share-of-wallet with existing customers as they make investments in energy transition-related technologies, including those that support fleet electrification and infrastructure. Importantly, customer interest in our expanded capabilities has been strong with a quickly growing pipeline of lightweight materials fabrication bidding activity currently underway. We continue to expect that we will deliver at least $20 million
“Our fourth quarter performance was a solid finish to the year,” noted Reddy. “We delivered organic net sales growth of more than 6% in the fourth quarter, while our Adjusted EBITDA margins finished the year at nearly 12% .”
“In 2024, we anticipate that a combination of share gains, enhanced productivity, a higher-value sales mix and continued price discipline will position us to deliver another year of profitable growth,” continued Reddy. “We expect that our Hazel Park facility will approach $100 million $3 $6 million
“For the full-year 2024, these actions are expected to result in mid-to-high single digit organic net sales growth, between 40 to 80 basis points of Adjusted EBITDA margin expansion, and significant year-over-year growth in free cash flow generation, putting us on-pace to achieve the 2026 financial targets introduced at our 2023 Investor Day. While our 2024 outlook contemplates a potential softening in macroeconomic conditions, we continue to experience pronounced demand strength across our business which, together with the benefits of our MBX self-help actions, position MEC to deliver above-market growth through the cycle.”
“Looking ahead, our capital allocation strategy will continue to prioritize debt reduction, returns-focused organic growth investments, together with opportunistic open-market purchase of our common equity under our existing share repurchase authorization,” continued Reddy. “We continue to expect that MEC will achieve our net leverage target of 1.5x to 2.0x by the end of 2024.”
PERFORMANCE SUMMARY
Net sales increased by 15.6% on a year-over-year basis in the fourth quarter 2023, driven in part by the recent acquisition of MSA and increased organic volumes in our construction, military, powersports and other end markets, partially offset by softening demand in our agriculture end markets. Net sales were unfavorably impacted by an estimated $5.0 million 6.1% year-over-year in the fourth quarter 2023.
Manufacturing margin was $18.2 million 12.3% of net sales, versus $13.0 million 10.1% of net sales, in the prior year period. The year-over-year increase in manufacturing margin was driven by the increased organic sales volumes, the MSA acquisition and MBX initiatives, partially offset by fixed cost under-absorption associated with new project launches, operations restructuring expense and the impact of the UAW strikes.
Profit sharing, bonus and deferred compensation expense decreased $0.5 million $3.6 million $7.2 million $6.0 million
Interest expense was $3.6 million $1.2 million
Net income for the fourth quarter of 2023 was $2.2 million $0.11 $2.4 million $0.12
MEC reported Adjusted EBITDA of $17.7 million 11.9% of net sales, versus $11.6 million 9.0% of net sales, in the prior-year period. Fourth quarter 2023 Adjusted EBITDA reflects $1.3 million $1.8 million $1.6 million
Fourth quarter Adjusted net income was $4.4 million $0.21 $3.1 million $0.15
Free cash flow during the fourth quarter 2023 was $19.9 million ($0.7) million in the prior year period. The increase in free cash flow was primarily attributable to a $7.6 million $13.0 million
END MARKET UPDATE
Three Months Ended
December 31,
2023
2022
Commercial Vehicle
$
52,758
$
53,283
Construction & Access
25,902
25,476
Powersports
24,552
19,233
Agriculture
14,307
12,423
Military
8,871
7,860
Other
22,191
10,252
Net Sales
$
148,582
$
128,527
Commercial Vehicles
MEC is a Tier 1 supplier to many of the country’s top original equipment manufacturers (OEM) of commercial vehicles providing exhaust & aftertreatment, engine components, cooling, fuel and structural systems for both heavy- and medium-duty commercial vehicles.
Net sales to the commercial vehicle market were $52.8 million 1.0% versus the prior-year period. The decrease in sales was primarily the result of the estimated $5.0 million 8.4% versus the prior-year period. The increase in net sales when excluding the estimated UAW strike impact was primarily the result of new project start-ups, strong order volumes and the prior-year impact of customer supply chain challenges.
Construction & Access
MEC manufactures components and sub-assemblies for the construction & access market including fenders, hoods, supports, frames, platforms, frame structures, doors and tubular products such as exhaust & aftertreatment, engine components, cooling system components, handrails and full electro-mechanical assemblies.
Net sales to the construction & access market were $25.9 million 1.7% versus the prior-year period. The increase in sales was primarily due to increased volumes for construction customers resulting from public infrastructure and non-residential construction demand.
Powersports
MEC manufactures stampings and complex metal assemblies and coatings for the marine propulsion, all-terrain vehicles (ATV), multi-utility vehicles (MUV) and motorcycle markets. MEC’s powersports expertise includes axle housings, steering columns, swing arms, fenders, suspension components, ATV/MUV racks, cowl assemblies and vehicle frames.
Net sales to the powersports market were $24.6 million 27.7% versus the prior-year period. The increase in sales was the result of higher volumes from new project wins, share gains from both new and existing customers, and the prior-year impact of customer supply chain challenges.
Agriculture
MEC is an integral partner in the supply chain of the world’s leading agriculture OEMs manufacturing components and sub-assemblies including fenders, hoods, supports, frames, platforms, frame structures, doors, and tubular products such as exhaust, engine components, cooling system components, handrails and full electro-mechanical assemblies.
Net sales to the agriculture market were $14.3 million 15.2% versus the prior-year period. The increase in sales was mostly driven by market share gains which were slightly offset by demand softness in our legacy business.
Military
MEC holds the International Traffic in Arms Regulations (ITAR) certification and produces components for the United States military. Products include exhaust, engine components, cooling, fuel, suspension, structural systems, and chemical agent resistant coating (CARC) painting capabilities.
Net sales to the military market were $8.9 million 12.9% versus the prior-year period. Contributions from new programs, new vehicle introductions and demand associated with the conflict in Ukraine , contributed to the year-over-year sales growth.
Other
MEC also produces a wide variety of components and assemblies for customers in the power generation, industrial equipment & fixtures, consumer tools, mining, forestry, automotive, and medical markets.
Net sales to other end markets for the fourth quarter 2023 were $22.2 million 116.5% year-over-year. The increase is primarily attributable to MSA-related contributions, which was acquired on July 1, 2023. Legacy net sales to this end market category increased 20.8% year-over-year, primarily due to the launch of new customer projects.
STRATEGIC UPDATE
During the fourth quarter, MEC continued the rigorous implementation of its MEC Business Excellence (MBX) initiative, a value-creation framework designed to drive sustained operational and commercial excellence across all aspects of the organization. Upon full implementation, MEC expects MBX to drive total net sales of between $750 $850 million 14% to 16% and free cash flow of between $65 $75 million
Drive a High-Performance Culture. The Company is focused on effectuating cultural change across the organization by implementing performance-based metrics, daily lean management and other process-oriented strategies. Through these efforts, the Company is building a high-performance culture capable of driving improved performance, asset utilization and cost optimization. During the fourth quarter, the Company continued the implementation and alignment of processes and best-practices across the enterprise to drive strategic execution. As part of the implementation, the Company has updated its organizational mission statement to align with a culture of standardization and consistency; One MEC. One Mission.
Drive Operational Excellence. The Company is focused on leveraging technologies and capabilities to increase productivity and reduce costs across the value chain. The Company intends to achieve this objective through the implementation of lean initiatives such as value stream mapping, sales, inventory, and operations planning (SIOP), and further optimization of its supply chain and procurement strategies. The Company’s operational excellence initiatives also focus on improving fixed cost absorption, labor productivity and inventory efficiency by leveraging its recent investments in advanced manufacturing capabilities and automation. As of the end of the fourth quarter, the Company had held over 125 MBX lean events which contributed to improved margins and inventory utilization. Also during the fourth quarter, the Company restructured its operation teams in an effort to centralize and streamline leadership. MEC continues to estimate that its operational excellence initiatives will generate 180 to 270 bps of Adjusted EBITDA margin improvement by 2026.
Drive Commercial Expansion. The Company is focused on driving commercial growth through an integrated, solutions-oriented approach that leverages its full suite of design, prototyping, and aftermarket services; an expansion of its fabrication capabilities beyond steel, with an emphasis on lightweight aluminum, plastics and composites; diversification within high-growth energy transition markets; further market penetration within existing end markets; and the implementation of value-based pricing. In July 2023, the Company closed the acquisition of MSA, which positions MEC to capitalize on revenue synergies within its existing legacy customer base and is now positioned to grow organically by pursuing demand for light-weight aluminum products in high-growth energy transition and fleet electrification applications. During the fourth quarter, MEC continued to expand its pipeline of cross-selling opportunities with existing customer to leverage MSA’s aluminum extrusion capabilities. The Company expects to begin recognizing both revenue and cost synergies from the MSA acquisition beginning in 2024.
Drive Human Resource Optimization. The Company remains focused on the recruitment and retention of skilled, experienced employees to support the growth of its business. This component of the MBX value creation framework is designed to provide competitive, performance-based incentives; develop high-potential candidates for internal development and advancement; ensure business continuity through multi-tiered succession planning; and to ensure a stable recruiting pipeline. As part of this effort, the Company began the process of relocating its corporate headquarters to Milwaukee , which was completed during the first quarter of 2024.
BALANCE SHEET UPDATE
As of December 31, 2023, MEC had net debt outstanding of $149.5 million $250.0 1 million. During the fourth quarter 2023, the Company utilized free cash flow to repay $21.8 million
_________________
1 This amount is reduced to approximately $102.5 million $147.5 million
FINANCIAL GUIDANCE
Today, the Company issued financial guidance for the full year 2024. All guidance is current as of the time provided and is subject to change.
FY 2023
FY 2024 Forecast
(in Millions)
Actual
Low
Mid
High
Net Sales
$
588.4
$
620
$
630
$
640
Adjusted EBITDA
$
66.1
$
72
$
74
$
76
Free Cash Flow
$
23.8
$
35
$
40
$
45
The Company’s 2024 guidance reflects the expected softening in end market demand as the result of various macroeconomic factors, which the Company expects will be offset by the continued ramp-up of new project work with both new and existing customers. The Company’s 2024 financial guidance also reflects incremental contribution from the MSA acquisition, including $20 $30 million $4 $6 million
The Company’s 2024 financial guidance reflects incremental contributions from MBX related initiatives of $3 $6 million
The Company’s 2024 Free Cash Flow guidance reflects improved working capital utilization relative to 2023 and capital expenditures of between $15 $20 million
FOURTH QUARTER 2023 RESULTS CONFERENCE CALL
The Company will host a conference call on Wednesday, March 6, 2024 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).
For a live webcast of the conference call and to access the accompanying investor presentation, please visit www.mecinc.com and click on the link to the live webcast on the Investors page.
For telephone access to the conference, call (833) 470-1428 within the United States , or call (833) 950-0062 within Canada and please use the Access Code: 431724.
FORWARD-LOOKING STATEMENTS
This press-release includes forward-looking statements that reflect plans, estimates and beliefs. Such statements involve risk and uncertainties. Actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors. Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to: macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing supply chain constraints affecting some of our customers, labor availability and material cost pressures, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including future uncertain impacts); risks relating to developments in the industries in which our customers operate; risks related to scheduling production accurately and maximizing efficiency; our ability to realize net sales represented by our awarded business; failure to compete successfully in our markets; our ability to maintain our manufacturing, engineering and technological expertise; the loss of any of our large customers or the loss of their respective market shares; risks related to entering new markets; our ability to recruit and retain our key executive officers, managers and trade-skilled personnel; volatility in the prices or availability of raw materials critical to our business; manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements; our ability to successfully identify or integrate acquisitions; our ability to develop new and innovative processes and gain customer acceptance of such processes; risks related to our information technology systems and infrastructure; geopolitical and economic developments, including foreign trade relations and associated tariffs; results of legal disputes, including product liability, intellectual property infringement and other claims; risks associated with our capital-intensive industry; risks related to our treatment as an S Corporation prior to the consummation of our initial public offering; risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan; and other factors described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q. This discussion should be read in conjunction with our audited consolidated financial statements included in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.
ABOUT MAYVILLE ENGINEERING COMPANY
Founded in 1945, MEC is a leading U.S. -based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Along with process engineering and development services, MEC maintains an extensive manufacturing infrastructure with 23 facilities across seven states. These facilities make it possible to offer conventional and CNC (computer numerical control) stamping, shearing, fiber laser cutting, forming, drilling, tapping, grinding, tube bending, machining, welding, assembly, and logistic services. MEC also possesses a broad range of finishing capabilities including shot blasting, e-coating, powder coating, wet spray and military grade chemical agent resistant coating (CARC) painting. For more information, please visit www.mecinc.com .
NON-GAAP FINANCIAL MEASURES
This press release contains financial information calculated in a manner other than in accordance with U.S. generally accepted accounting principles (“GAAP”).
The non-GAAP measures used in this press release are EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Diluted EPS, and Free Cash Flow.
EBITDA represents net income before interest expense, provision (benefit) for income taxes, depreciation, and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period. Adjusted EBITDA represents EBITDA before CEO transition costs, stock-based compensation expense, MSA acquisition related costs, loss on debt extinguishment, field replacement claim, Hazel Park transition and legal costs due to the former fitness customer, costs recognized on step-up of MSA acquired inventory, impairment charges on long-lived assets and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer and Chief Operating Officer restructuring costs. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. Adjusted Net Income and Diluted EPS represent net income before the aforementioned Adjusted EBITDA addback items which do not reflect our core operating performance. Free Cash Flow represents net cash provided by, or used in, operating activities, less cash flows used in the purchase of property, plant and equipment. We present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Diluted EPS, and Free Cash Flow as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or cash flow provided by, or used in, operating activities, or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. These measures may not be comparable to the similarly named measures reported by other companies and have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.
Please reference our reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to EBITDA, Adjusted EBITDA, Adjusted Net Income and Diluted EPS, Free Cash Flow and the calculation of EBITDA Margin and Adjusted EBITDA Margin included in this press release.
Mayville Engineering Company, Inc.
Consolidated Balance Sheet
(in thousands, except share amounts)
December 31,
December 31,
2023
2022
ASSETS
Cash and cash equivalents
$
672
$
127
Receivables, net of allowances for doubtful accounts of $685 $545
57,445
58,001
Inventories, net
67,782
71,708
Tooling in progress
5,457
7,938
Prepaid expenses and other current assets
3,267
3,529
Total current assets
134,623
141,303
Property, plant and equipment, net
175,745
145,771
Assets held for sale
—
83
Goodwill
92,650
71,535
Intangible assets, net
58,667
43,809
Operating lease assets
32,233
36,073
Other long-term assets
2,743
2,007
Total assets
$
496,661
$
440,581
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable
$
46,526
$
53,735
Current portion of operating lease obligation
5,064
4,857
Accrued liabilities:
Salaries, wages, and payroll taxes
6,368
7,288
Profit sharing and bonus
3,107
6,860
Current portion of deferred compensation
289
18,062
Other current liabilities
10,355
11,646
Total current liabilities
71,709
102,448
Bank revolving credit notes
147,493
72,236
Operating lease obligation, less current maturities
28,606
31,891
Deferred compensation, less current portion
3,816
3,132
Deferred income tax liability
12,606
11,818
Other long-term liabilities
2,453
1,189
Total liabilities
$
266,683
$
222,714
Commitments and contingencies
Common shares, no par value, 75,000,000 authorized, 21,853,477 shares issued at December 31, 2023 and 21,645,193 at December 31, 2022
—
—
Additional paid-in-capital
205,373
200,945
Retained earnings
34,118
26,274
Treasury shares at cost, 1,542,893 shares at December 31, 2023 and 1,472,447 at December 31, 2022
(9,513
)
(9,352
)
Total shareholders’ equity
229,978
217,867
Total
$
496,661
$
440,581
Mayville Engineering Company, Inc.
Consolidated Statement of Net Income
(in thousands, except share amounts and per share data)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net sales
$
148,582
$
128,527
$
588,425
$
539,392
Cost of sales
130,371
115,542
518,722
478,323
Amortization of intangible assets
2,093
1,738
7,742
6,952
Profit sharing, bonuses, and deferred compensation
3,551
4,076
11,588
7,997
Employee stock ownership plan income
—
(1,668
)
—
—
Other selling, general and administrative expenses
7,213
6,038
30,182
24,692
Impairment of long-lived assets and gain on contracts
—
—
—
(4,346
)
Income from operations
5,354
2,801
20,191
25,774
Interest expense
(3,559
)
(1,217
)
(11,092
)
(3,380
)
Loss on extinguishment of debt
—
—
(216
)
—
Income before taxes
1,795
1,584
8,883
22,394
Income tax expense (benefit)
(432
)
(797
)
1,039
3,667
Net income and comprehensive income
$
2,227
$
2,381
$
7,844
$
18,727
Earnings per share:
Basic
$
0.11
$
0.12
$
0.38
$
0.92
Diluted
$
0.11
$
0.12
$
0.38
$
0.91
Weighted average shares outstanding:
Basic
20,409,942
20,229,811
20,415,157
20,399,737
Diluted
20,673,443
20,552,054
20,698,970
20,682,628
Mayville Engineering Company, Inc.
Consolidated Statement of Cash Flows
(in thousands)
Twelve Months Ended
December 31,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
7,844
$
18,727
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
27,338
22,359
Amortization
7,742
6,952
Allowance for doubtful accounts
140
(86
)
Inventory excess and obsolescence reserve
183
80
Stock-based compensation expense
4,485
3,759
Gain on disposal of property, plant and equipment
(526
)
(161
)
Impairment of long-lived assets and gain on contracts
—
(4,346
)
Deferred compensation
(17,089
)
(3,923
)
Loss on extinguishment of debt
216
—
Non-cash lease expense
3,840
4,251
Other non-cash adjustments
259
329
Changes in operating assets and liabilities:
Accounts receivable
7,791
(2,498
)
Inventories
13,441
(1,631
)
Tooling in progress
2,555
(3,988
)
Prepaids and other current assets
532
(616
)
Accounts payable
(9,438
)
9,361
Deferred income taxes
687
4,710
Operating lease obligations
(3,078
)
(3,856
)
Accrued liabilities
(6,559
)
3,003
Net cash provided by operating activities
40,363
52,426
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(16,598
)
(58,610
)
Proceeds from sale of property, plant and equipment
1,059
7,942
Payment for acquisition, net of cash acquired
(88,593
)
—
Net cash used in investing activities
(104,132
)
(50,668
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank revolving credit notes
588,040
437,939
Payments on bank revolving credit notes
(512,783
)
(433,312
)
Repayments of other long-term debt
(6,673
)
(1,107
)
Payments of financing costs
(1,205
)
—
Purchase of treasury stock
(2,661
)
(4,947
)
Payments on finance leases
(404
)
(322
)
Net cash provided by (used in) financing activities
64,314
(1,749
)
Net increase in cash and cash equivalents
545
9
Cash and cash equivalents at beginning of period
127
118
Cash and cash equivalents at end of period
$
672
$
127
Mayville Engineering Company, Inc.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(in thousands)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net income and comprehensive income
$
2,227
$
2,381
$
7,844
$
18,727
Interest expense
3,559
1,217
11,092
3,380
Provision (benefit) for income taxes
(432
)
(797
)
1,039
3,667
Depreciation and amortization
9,582
7,755
35,080
29,311
EBITDA
14,936
10,556
55,055
55,085
CEO transition costs
—
—
—
1,512
Loss on extinguishment of debt
—
—
216
—
MSA acquisition related costs
12
—
1,411
—
Stock-based compensation expense
730
905
4,485
3,759
Field replacement claim
—
—
490
—
Hazel Park transition and legal costs due to former fitness customer
1,170
91
2,650
4,768
Costs recognized on step-up of MSA acquired inventory
—
—
891
—
Impairment of long-lived assets and gain on contracts
—
—
—
(4,346
)
COO restructuring costs
855
—
855
—
Adjusted EBITDA
$
17,703
$
11,552
$
66,053
$
60,778
Net sales
$
148,582
$
128,527
$
588,425
$
539,392
EBITDA Margin
10.1
%
8.2
%
9.4
%
10.2
%
Adjusted EBITDA Margin
11.9
%
9.0
%
11.2
%
11.3
%
Mayville Engineering Company, Inc.
Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Diluted EPS
(in thousands, except share amounts and per share data)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2023
2022
2023
2022
Earnings
Diluted EPS
Earnings
Diluted EPS
Earnings
Diluted EPS
Earnings
Diluted EPS
Net income and comprehensive income
$
2,227
$
0.11
$
2,381
$
0.12
$
7,844
$
0.38
$
18,727
$
0.91
CEO transition costs
—
—
—
—
—
—
1,512
0.07
Loss on extinguishment of debt
—
—
—
—
216
0.01
—
—
MSA acquisition related costs
12
0.00
—
—
1,411
0.07
—
—
Stock-based compensation expense
730
0.04
905
0.04
4,485
0.22
3,759
0.18
Field replacement claim
—
—
—
—
490
0.02
—
—
Hazel Park transition and legal costs due to former fitness customer
1,170
0.06
91
0.00
2,650
0.13
4,768
0.23
Costs recognized on step-up of MSA acquired inventory
—
—
—
—
891
0.04
—
—
Impairment of long-lived assets and gain on contracts
—
—
—
—
—
—
(4,346
)
(0.21
)
COO restructuring costs
855
0.04
—
—
855
0.04
—
—
Tax effect of above adjustments
(555
)
(0.03
)
(236
)
(0.01
)
(2,549
)
(0.12
)
(1,320
)
(0.06
)
Adjusted net income and comprehensive income
$
4,439
$
0.21
$
3,141
$
0.15
$
16,293
$
0.79
$
23,100
$
1.12
Mayville Engineering Company, Inc.
Reconciliation of Free Cash Flow
(in thousands)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net cash provided by operating activities
$
26,667
$
19,112
$
40,363
$
52,426
Less: Capital expenditures
6,784
19,802
16,598
58,610
Free cash flow
$
19,883
$
(690
)
$
23,765
$
(6,184
)
View source version on businesswire.com: https://www.businesswire.com/news/home/20240305045239/en/
INVESTOR CONTACT
MEC@val-adv.com
Source: Mayville Engineering Company
What were MEC's net sales for the fourth quarter of 2023?
MEC reported net sales of $148.6 million for the fourth quarter of 2023, reflecting a 15.6% increase year-over-year.
What was MEC's net income for full-year 2023?
MEC reported a net income of $7.8 million for full-year 2023.
What is MEC's financial guidance for full-year 2024?
MEC's financial guidance for full-year 2024 includes net sales between $620 million and $640 million, adjusted EBITDA between $72 million and $76 million, and free cash flow between $35 million and $45 million.
What strategic initiatives is MEC focusing on?
MEC is focusing on driving a high-performance culture, operational excellence, commercial expansion, and human resource optimization as part of its strategic initiatives.
What is the goal of MEC's MEC Business Excellence (MBX) framework?
MEC aims to achieve total net sales of between $750 to $850 million, adjusted EBITDA margin expansion to between 14% to 16%, and free cash flow of between $65 to $75 million by 2026 through its MBX framework.
